Shares of Tesla have fallen nearly 38 percent since the offer was announced, forcing significant changes in the way it planned to fund the offer.
The first version of the financing included a $ 13 billion leverage loan, a $ 12.5 billion margin loan secured by $ 62.5 billion of its Tesla stake and $ 21 billion in capital. It sold $ 8.5 billion worth of Tesla shares, presumably to help fill the capital component.
The second attempt to structure financing last month kept the leveraged loan at $ 13 billion, but the margin loan was halved to $ 6.25 billion (secured by $ 31 billion). shares of Tesla) and the capital component rose to $ 27 billion. Musk said he has $ 7 billion in capital from outside parties committed to the deal.
Musk’s ego and ambition to control what has been described as “the city’s digital square” threatens to destroy much of its net worth.
Then, at the end of last month, there was another change in funding, with the margin loan completely gone and the capital tranche increasing to $ 33.5 billion. Musk has tried to persuade some existing Twitter shareholders, including founder Jack Dorsey, to incorporate their stakes into his bidding vehicle.
It is not difficult to find out why funding has evolved.
With the implosion of Tesla’s share price, the 5: 1 ratio between the margin loan and the required security meant that an increasing number of its Tesla shares were required as collateral for the loan.
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It’s also not hard to figure out why Musk might want to truncate the offer.
The timing of the bid, made during the second wave of technology stock sales this year (the technology stock market had recovered in March after sharp falls since last November’s peak), means that promises to pay far above the odds of Twitter. which has losses and had negative cash flows last year.
There is no real evidence, beyond the $ 7 billion already pledged by other investors, that it is making significant progress in raising the remaining $ 33.5 billion in capital needed to complete the latest version of the financing. of his offer, which leaves him was personally exposed to fill the $ 26.5 billion hole in the capital component.
Given that the obvious source of funds of this magnitude would be its stake in Tesla and that the value of Tesla shares has fallen, the company is worth about $ 535 billion less than its valuation of 1 , $ 3 trillion at its peak last year, Musk’s ego and his ambition to control what he describes as “the city’s digital square” threatens to destroy much of his net worth.
Shares of Tesla have fallen nearly 38 percent since the offer was announced, forcing significant changes in the way it planned to finance the offer. Credit: Bloomberg
He has not helped his own cause, or Tesla shareholders, by sending an email to Tesla executives last week that he was considering a freeze on hiring and job cuts of up to 10 percent of 100,000 employees. of Tesla around the world, saying it had “a very bad feeling.” ”On the state of the economy.
He later backtracked over the weekend, saying the total workforce would actually increase over the next year, but the initial message provides an insight into his mood. He is nervous about the prospects for the economy and Tesla, and therefore the context for the acquisition of Twitter at a clearly inflated price.
The view in the United States is that Musk will face a difficult battle to try to get out of the deal with Twitter, with Twitter determined, for obvious reasons, to enforce the deal.
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If you end up having to complete the deal, it may be one of the worst-selling transactions in history, as the entire market was aware that rising interest rates and declining liquidity as the Board of Directors the Federal Reserve responded to rampant inflation posed a clear and powerful threat to the stock market and to technology companies in particular.
If you can’t use the “bot” excuse to renounce the deal or materially (very materially) lower the price, the $ 1 billion breakout rate for leaving the deal could, if Twitter allows it instead. asking a court to enforce the deal seems like the best option to save much of your wealth.
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